Seller’s Page : A discussion

Are you thinking of selling a business?

Why should you trust your offering to us?

My mother would have first pointed out that I was nicer, smarter and better looking. That’s what mothers do.

But she was also a librarian and would have had other facts at her fingertips. The paramount and easily confirmable fact is that this website gets vastly more traffic than any other web site in Alberta dedicated business brokerage.

To prove it, she’d point you to alexa.com, a web service run by Amazon.

Amazon’s Alexa only shows the numbers for the busiest of the world’s 200 million or so active web sites. We are in the top 1% of the whole world. As mom would say . . . “That is pretty good for a prairie boy.”

So for your purposes, there’s no other website dedicated to business brokerage in Alberta that gets even close to our traffic.

Couple that with the fact that anyone seriously looking for an Alberta business is first searching the internet.

“Our working premise is to ensure everyone actively looking for a business in Alberta will know a business like yours is for sale.”

This means that while I can’t promise you that we’ll find you a buyer. I’m confident saying that just about all active business buyers and their agents in Alberta will know that there’s a company like yours for sale.

So what follows below is just the gravy.

We can help. . .

What We Do – The short version

I find potential buyers, qualify them according to instructions you will give me, have them sign a non-disclosure form and then show them, in small bites, the information they will need to decide if they want to purchase your business.

If they do not decide to purchase, your information is protected.

If they do decide make a proposal, I will work with them to draft a letter of intent detailing the commercial terms of the deal and show it to you.

You will propose certain changes and I will explain them to the buyer. We’ll go back and forth until one side walks away or both parties sign-off on the commercial terms in the letter of intent.

The letter of intent is an agreement in principle. It is not like a real estate offer. It is not a contract.

Instead, the buyer will take the letter of intent to his lawyer to be drafted into a purchase agreement.

The purchase agreement will go to your lawyer for review. Only if he approves and advises you to sign will cheques and keys change hands.

My fees are 7% of what we negotiate. The business is sold without debt or current assets such as inventory. Downward adjustments on the close to remove debt or upwards adjustments to reflect current assets do not affect my fees.

In this day and age, anybody looking for a business is using the internet. My competitive advantage as a broker is the busiest web site in Alberta and our marketing program that attracts folks to it.

The long version is this whole website and you should spend time reading it over. I am told that while Amazon says it’s the busiest, it is also the best one in the industry to explain the process of business transitions.

Read over the Tips Page, the Buyer’s Pages and all the way down to the bottom of this Seller’s Page. Know these three pages and you’ll know more about the process of selling a business than just about anybody you’ll run across.

Why folks tell me they chose our services when they wanted to sell a business:

No Exclusive Contract.

If your accountant, neighbour or barber introduces your buyer then it has nothing to do with me and I will bow out gracefully. Beware of anybody who wants an exclusive contract. That’s not business brokerage and none of the pros ask for one.

Also be concerned about ‘weasle’ provisions like needing to pay a commission if you refuse a valid offer. That’s real estate, not business brokerage. I’ve been doing this long enough to respect a client’s sixth sense that something’s not right.

No Extra Fees.

There is no extra fee to value your business. There is no extra fee to build a marketing plan or place a sales profile on our web site.

There’s no extra fees if I have to work with other brokers to find your buyer.

Beware of anyone who asks for any fees for service beyond finding you a buyer. That’s all a business broker should get paid for.

Strategic Buyer Discovery

Instead of simply hoping somebody will visit our web site and see your offering, I work with sellers to discover strategic buyers.

These are folks whose current business might gain by having control of your business. They are seldom actively looking for a business so we have to search them out to plant the idea in their minds.

I know what I don’t know

I don’t know tax law. I don’t know contract law. I do know how to bring folks together to agree on commercial terms. But those terms will have to be washed through your accountant to ensure they do not attract adverse tax consequences.

Then the commercial terms go to a lawyer for proper construction into a purchase contract. This is not a real property transaction and ‘one size does not fit all.’ Be really, really scared of anybody other than your lawyer offering to do your purchase contract.

I know how to sell a business

I work with other brokers I will share fees with other brokers and actively solicit their help. Beware of anyone who does not have a page on their web site asking others to help sell your business. (Here is my page setting out how I work with other brokers.)

I know it’s your baby. Have to have been there to know that. ‘Nuff said.

This Web Site. According to Google Analytics, we get more hits on our offerings page than we do on our home page.

This can only happen because folks have our offerings page bookmarked on their own computers.

These are the serious buyers of an Alberta business and they are checking our offerings on a regular basis.

We maintain a North America wide toll free number so buyers outside Calgary and Edmonton won’t hesitate to pick up the phone to ask about your offering. Nobody else offers this.

We even have a free Skype call-in for buyers from outside North America. And yes, from time to time, it rings.

I can’t promise your business will sell, but I can promise to expose your business to more currently active buyers than anybody else.

Experience I first started brokering in ’77. I am a classic broker living on the phone and working to bring Buyers and Sellers together. I maintain a huge list of folks who have contacted me about purchasing a business.

It’s my job to match the needs of one of these Buyers, or people very much like them, to your offering.

Doing this while keeping your secrets is a well honed skill learned through decades of brokering. Your business is your business.

How you manage your collection of assets, people, and ideas in such a way as to produce a positive cash flow is the basis of your firm’s value. It’s called ‘performance management’ by the gurus. It is very private.

This is why the marketing of a business differs from most other marketing. A realtor selling a house wants everybody to know that it is for sale.

The seller of a business most often does not want it widely known that he is selling the business. He does not want to make public any private information about the affairs of his company.

This privacy is mostly to protect relationships.

The public knowledge that business is for sale can have a negative impact on customers, suppliers, employees and bankers.

The information might also have a very positive impact on competitors or for the owners of related businesses as they broadcast that a seller must be in trouble since he is trying to sell.

So we have a paradox. How do we sell a business without telling anybody about it? The short answer is ‘with some difficulty’.

Outward Bound Marketing

The successful sale of a business seems to be the result of either serendipity (say a competitor makes an unsolicited offer) or an aggressive outward bound marketing program by an experienced business broker with local knowledge and years of contacts.

1. The Trees – Strategic Buyers

The first prong is the targeting of potential buyers. We’ll discuss the folks who sell the same products or services as you do to the same general customer base (your competitors), folks who sell the same product or services as you do, but to a different customer base (out of town companies who may pay you for say, a Calgary customer list and reputation), folks who sell a different product to the same customer base (and who may look at your firm as line extension to their existing products and services), and finally the buyer who is looking for a business because he’s sold another, come into cash through a golden handshake or some other windfall, or is simply tired of working for the ‘man’. We’ll decide which of these to start with and what approach to take as I contact them.

2. Then the Forest

The second prong is the adoption of a ‘forest’ approach to marketing the business by initially dwelling on the big picture while withholding as much information about the ‘trees’ as we can yet still attract interest.

At this point, the potential buyer must be told everything about the business buy in small bites so if he hears something that kills his interest the rest of your info is still unknown.

To get their interest, all potential buyers must be told price, the cash flow expectations and the talents that have to be replaced with the change of owner / manager.

If it’s a competitive field, letting out the nature of the business is unlikely to diminish the firm’s value but if it’s one of only two or three businesses like this in Alberta, then it’s best to say related to a larger category instead a narrow specific category.

Buyers do come in flavours. Some want to deal with the public while others want to be suppliers of commercial goods and services.

There are also buyers who want the security of a large pool of potential customers while other buyers would prefer to work on relationships with a smaller number of more important customers.

We have to have this information at hand. This is about the limit of what ‘everyone’ needs to know although each potential buyer will have other quite legitimate questions such as is it close to my home, is travel required, is it seasonal, etc. These can all be answered without divulging corporate secrets.

3. Time, Talent, and Treasure

Even though the above questions are fairly innocuous, we’ll first qualify the potential buyer for Time, Talent, and Treasure.

Is the potential buyer an investor or a hands-on manager? Does he have the time required to make the business work. Does he have the talents to fill the hole left by the departing owner? And finally and of greatest important, what is his financial situation? Can he really afford to buy the company?

A potential buyer might lie but if we present these questions in such a way as to save the buyer’s time, the potential buyer is seldom offended and seldom gives wrong information.

We do this despite the non-disclosure documents all potential buyers have to sign. ‘Stuff’ gets out. Either by design or inadvertently, somebody who learned about the business and decided it was not suitable for them may say something to somebody they should not.

I don’t think I’ve ever seen somebody maliciously break their non-disclosure agreement. When leaks have happened, mostly we hear either ‘I forgot it was secret’ or ‘I didn’t think that part was important.’

If the potential buyer seems to be a suitable buyer, we will continue to answer questions about the forest. It is human nature for the buyer to want to verify certain information right away. That’s information about the trees.

We always reply that “Our satisfactory answer to that question should be a condition of your offer.” The potential buyer may counter with an argument about possibly wasting his time. Through the years, we’ve learned the best action here is to agree. “Yes, Mr. Buyer, I suppose it is possible that we are pulling your leg for some strange reason and you are taking the risk that we are wasting your time. But you are asking the seller to take the risk that private information that he gives out may become public and diminish the value of his business. That is not a fair exchange.”

And then, and this is very important, we quickly add “If the shoe was on the other foot and you were the seller, would you take that risk?” We very seldom get somebody to say ‘yes’ to this.

But do expect a sophisticated buyer to ask how many people have seen the firm’s private information. He’s wise enough to know that each one of them now poses a competitive threat.

In the words of business guru Tom Peters, did they ‘creatively swipe’ some of this information? The more folks who have seen the ‘trees’ the more worried a potential buyer will become.

(An aside – tax accountants are notorious for getting their clients who are ready to pass the torch together with clients who may be interested in expanding.

Sellers should avoid these meetings unless they have carefully worked out beforehand that only very general information is to be discussed. Usually it’s much too early in the marketing process for the seller to be involved.

Potential buyers, on the other hand, should say a little prayer of thanks should their accountant ask them to one of these meetings.

No matter how busy you are, seeing the private information of a successful company is always your most profitable way to pass an afternoon. You’ll be amazed at what the sellers may tell you while their accountant beams at how well the meeting seems to be going.)

Finally, Due Diligence

Once we’ve found our qualified buyers, there will be a fair amount of back and forth between them and the seller. But, in the end, we’ll either have an offer or a walk-away without having shown too many of the firm’s secrets. His demonstration of interest will be conditional on the buyer’s verification that the picture we provided of the forest is indeed true. And expect him (and his accountant) to search the company’s information for any swamp willows that may have crept into your forest. It’s a common condition that the letter of intent be conditional on the approval of advisors.

But in the end, as long as we’ve been straightforward, the deal will close and the torch will pass.

A Mile in his Moccasins

It would be a good idea to read the Buyer’s Page to get an idea of what’s going on in the buyers head. The more both sides of a transaction can understand each other’s needs, the greater the likelihood that a deal can get done.

My fee to find a buyer

My fees are 7% of what we negotiate with the buyer for the business not including inventory, other current assets nor any adjustments for debt.

The business is sold without debt or current assets. Downward adjustments on the close to remove debt or upwards adjustments to reflect current assets will not affect my fees.

Like your accountant or stockbroker, I will rely on your honest intentions and will not ask you to sign an exclusive marketing agreement with me.

My minimum fee is $10,000.

How I earn my fee

I earn my fee by putting you together with the buyer.

I don’t earn a fee unless a transaction is completed.

Your expectations of me

Honesty and Integrity

Confidentiality

Knowledge of the process

A rifle approach searching for strategic buyers

A shotgun approach attracting general buyers

Qualifying potential buyers as to time, talent and treasure

Status reports and regular discussions

Regular contact (remembering that I’m an old broker living on the phones instead of endless meetings or pressing-the-flesh.)

Limit other professional fees by coordinating the drafting of commercial terms into a letter of intent with the buyer.

My role will be limited once the deal is in the hands of your professional advisors. Our letter of intent will be sent to the buyer’s lawyer for crafting into a purchase agreement, both accountants if required to verify financial numbers, and finally to your lawyer for review and approval.

My expectations of you

Honesty and Integrity

Full disclosure of the firm’s position

Full disclosure of changes to the firm’s position

Confidentiality instructions including people I should not contact

Allow me to manage the search process for a buyer

Assistance in building a contact list of potential buyers

Timely provision of information requested by potential buyers

Meeting potential buyers at the appropriate time to discuss the firm’s operations.